Dow Jones futures will reopen Sunday evening. Treasury yields rose slightly on Friday after the March jobs report showed slower hiring and wage growth, but declining unemployment. Meanwhile, Tesla (D.S.L.A) is lowering the US prices of all its electric vehicles.
US stock markets were closed on Friday. Major indexes were good during the holiday-shortened trading week, with midweek bullbacks healthy and normal. But many sectors and leading stocks, including Tesla shares, sold off sharply.
The video embedded in this article discusses weekly market action and Google, Baba stock and analysis Intuitive surgery (ISRG)
Statement of Works
The Labor Department said nonfarm payrolls rose by 236,000, below estimates of 240,000. This was down from February’s revised 326,000.
Private payrolls rose just 189,000, below the 223,000 outlook. Manufacturing jobs unexpectedly fell by 1,000.
The unemployment rate also surprised, falling to 3.5%, returning to a long-term low. However, the labor force participation rate rose to a post-Covid high of 62.6%.
Hourly earnings rose 0.3% versus February. The annual gain was 4.2%, below the 4.3% outlook and the lowest in years. Three-month annualized wage growth fell to 3.2%.
The average work week was unexpectedly reduced to 34.4 hours.
Despite slower wage gains and private hiring, the odds of a Fed rate hike in May rose from 49% on Wednesday to 67% on Thursday.
McDonald’s (MCD) is cutting hundreds of jobs and slashing pay packages in a major restructuring, The Wall Street Journal reported on Friday. The fast-food giant temporarily closed its corporate offices on Monday and began notifying affected employees of the layoffs.
Samsung Electronics will cut memory-chip to “meaningful” levels after Q1 operating profit fell more than 95% than expected. That might be good news Micron technology (IN)
Taiwan Semiconductor (TSM) will report March and first-quarter sales early Monday.
Dow Jones Futures Today
Dow Jones futures rose 0.2% against the fair value on Friday, rebounding from slim losses ahead of the jobs report. S&P 500 futures advanced 0.2%. Nasdaq 100 futures rose 0.1%.
The 10-year Treasury yield rose 12 basis points to 3.41%. The 10-year yield hit a seven-month low Thursday.
Hong Kong and European markets will be closed on Easter Monday.
Dow futures will reopen at 6 p.m. ET Sunday, along with S&P 500 futures and Nasdaq futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Stock market rally
Stock market bulls had a mixed week. The Dow Jones Industrial Average rose 0.6% in weekly stock market trading. The S&P 500 index fell 0.1%. The Nasdaq fell 1.1% and the Russell 2000 fell 2.5%.
U.S. crude oil prices rose 6.65% to $80.92 a barrel, largely after Monday’s surprise OPEC+ production cut. Crude futures rose 20.9% in three weeks.
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Among growth ETFs, the innovator IBD 50 ETF (FFTY) fell 3.5% on the week. iShares Expanded Technology-Software Sector ETF (IGVfell 1.6%. A Microsoft stake is a major IGV holding. VanEck Vectors Semiconductor ETF (SMHIt gave up to 4.1%.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKKslipped 4.4% and the ARK Genomics ETF (ARKG) both fell 1.2% despite Thursday’s gains. Tesla shares are the No. 1 holding across Arc Invest’s ETFs.
Tesla price cut
Tesla slashed the US prices of all its EVs overnight. It’s the third time this year that Model S and X prices have dropped by $5,000. Model S starts at $84,990, Model X now starts at $94,990.
Meanwhile, Tesla dropped the US Model 3 price by $1,000 to an entry price of $41,990. The Model Y was reduced by $2,000 to $49,990.
Earlier in the week, Tesla dropped the prices of the Model 3 and Y once again in Australia.
Tesla cut global prices in January with US cuts on its S and X vehicles and additional European discounts in March. That, along with new US EV arrivals, pushed first-quarter Tesla deliveries to a record high. But they were less than factset scenarios. Production once again outstripped deliveries, with Model S and X output more than double sales.
Many analysts predict that Tesla’s price cuts are on track to support demand and erode its already valuable margins.
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Investors won’t have a chance to react to the latest Tesla price cut until Monday. But Tesla shares fell 10.8% this week to 185.06 following the Q1 delivery report. Shares fell below the 200.76 cup-with-handle buy point and the 50-day moving average.
A base formed below the 200-day line, which is not significant. The 200.76 buy point is no longer valid, but TSLA stock is working on a new handle, already with a 207.89 entry on the weekly chart. Of course, the 200-day line is still above that.
Tesla earnings for the first quarter are due on April 19, when investors will see how the price cuts have hit profit margins so far.
Google rose 3.8% on Thursday to trade above normal at 108.42. Shares crossed a cup-with-handle buy point of 106.69, according to MarketSmith analysis.
Google’s CEO said the company will soon add chat AI to its search engine Microsoft (MSFT) added ChatGPT to its Bing search engine and other products.
Alibaba shares rose 4.25% to 102.74 on Thursday, breaking the bottom of a cup-with-handle base and providing early entry. The official handle buy point is 105.15.
BABA shares rose in the week before Alibaba said it would split into six different units with their own CEOs and the option to file for IPOs.
Stock market rally analysis
Investors should judge the health of a market rally by looking at key indices and leading stocks. But they give some mixed signals. Keywords are fine. The Dow rose, the S&P 500 barely fell and the Nasdaq showed a natural, constructive rebound, recovering the 12,000 level on Thursday.
Google stock had a solid week and Meta platforms (Meta) was rising. Apple (AAPL) and Microsoft shares were little changed on the edge of buy areas. Meanwhile, Exxon Mobil (XOM), Merck (MRK) and United Health (UNH) had large weekly gains.
But there were several major failures. Construction and industrials-related groups fell on Tuesday, while growth stocks sold off on Wednesday. Many suffered significant damage, while others may return to normal relatively quickly. Jupiter’s regeneration, often from key positions, is certainly encouraging.
Defensive growth and defensive names had a strong week, including medical, consumer staples and utilities.
Will the cycle continue in defensive and defensive growth stocks, or is Jupiter the start of a growth rebound?
A lot may depend on how markets respond to slowing economic data. Investors cheered weak economic reports, which could bring an earlier end to central bank rate hikes. But at least last week, markets were more concerned about recession risks.
Dow futures and Treasury yields responded positively Friday to the March jobs report, which showed slower hiring and wage growth. But let’s see how Monday’s rally in the stock market reflects in real terms.
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What to do now
Investors may have wanted to reduce exposure last week. How much is likely depends on what stocks they own.
If the leading stocks show strength in the coming days, investors may make some fresh purchases. But don’t increase exposure too quickly and don’t focus too much on a particular stock or sector, especially volatile ones.
Now is a good time to create your watch lists. As the cycle continues, make sure you cast a wide net to find medical and other stocks that are strong.
Read the big picture every day to stay in tune with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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